On June 23, 2017, the Supreme Court of the United States finally decided Murr v. Wisconsin, __ U.S. __ (2017) (Case No. 15-214), a case that addressed land use regulations that “merged” adjacent parcels (the first of which was developed with a cabin, and the second of which was undeveloped) into one, for environmental reasons, despite the fact they were separately acquired, owned, taxed. The regulations ultimately prevented the development or sale of the second, undeveloped parcel.

The case sought an answer to the fundamental question, in a regulatory taking case, whether the “parcel as a whole” concept described in Penn Central Transportation Company v. City of New York establishes a rule that two legally distinct, but commonly owned contiguous parcels, must be combined for takings analysis purposes? The State of Wisconsin argued for a rule that would tie the definition of the parcel to state law, considering the two parcels in this case merged under the challenged regulations. The landowners argued for a rule that the lot lines define the relevant parcel.

The issue is important because defining the relevant parcel narrowly will tend to increase the impact of the regulation at issue, making it more likely to constitute a taking. Defining the relevant parcel more broadly will tend to do the opposite, reducing the severity of a regulation’s impact on the “parcel as a whole” and making it less likely to constitute a taking.

The case thus presented the Supreme Court an opportunity to provide clear guidance on how to identify the relevant property interest at stake in such cases. However, in a 5-3 opinion written by Justice Kennedy and joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan (Justice Gorsuch did not participate in the decision), the Court rejected the straightforward approaches suggested by both parties held instead that “the question of the proper parcel in regulatory takings cases cannot be solved by any simple test.”

Under the Court’s new rule for determining the relevant parcel, courts must consider at least three factors. First, they must consider the “treatment of the land” and how it is bounded or divided under state and local law. In particular, they must consider the landowner’s “reasonable expectations” and the “background customs and the whole of our legal tradition.” Second, they must consider the “physical characteristics” of the property. These include such nebulous factors as the physical relationship of any distinguishable tracts, the parcel’s topography, and the surrounding human and ecological environment. Third, they must consider the “value of the property under the challenged regulation,” including the effect of the burdened land on the value of other holdings.

The Court blithely claimed that its new multi-factor test is “objective.” In reality, however, and quite obviously, the test is entirely subjective, provides clarity to no one, and greatly complicates takings law.

Perhaps more problematically, the Court stated that Wisconsin’s merger provision is a legitimate exercise of government power and asserted that such “reasonable” land use regulations do not constitute a taking. In so stating, however, the Court appears to have revived the “substantially advances” due process language from its 1980 decision in Agins v. Tiburon. Takings mavens will recall, however, that in 2005, in Lingle v. Chevron, the Court unanimously rejected that language as “regrettably imprecise” and held instead that “such a test is not a valid method of discerning whether private property has been ‘taken’ for purposes of the Fifth Amendment.” The “substantially advances” test is a due process inquiry that reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights, and it not is tethered to the text or meaning of the Takings Clause.

Writing for the dissent, Chief Justice Roberts (joined by Justices Thomas and Alito) explained that, while the Court’s “bottom-line conclusion does not trouble me,” the majority “goes astray” with it’s new “elaborate test.” Chief Justice Roberts would stick with the Court’s traditional approach wherein state law defines the boundaries of distinct parcels of land and, except in rare circumstances, those boundaries determine the relevant parcel in regulatory takings cases.

Justice Thomas wrote a separate dissent calling for the Court to “take a fresh look” and determine whether its takings jurisprudence can be grounded in the original meaning of the Takings Clause of the Fifth Amendment or the Privileges and Immunities Clause of the Fourteenth Amendment.

The Murr case is an unequivocally resounding win for governmental regulators and a giant step back for property rights and clarity in the complex area of takings law. Each time I read the decision I am reminded of Justice Stevens’ dissent in Nollan v. California Coastal Commission, in which he aptly observed that “even the wisest of lawyers would have to acknowledge great uncertainty about the scope of this Court’s takings jurisprudence.” The Court’s latest takings decision underscores the unfortunate truth of that observation.

For more than 50 years, Miller Starr Regalia has served as one of California’s leading real estate law firms. Miller Starr Regalia has expertise in all types of real property matters, including full-service litigation and dispute resolution, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, exactions, title insurance, environmental law, and land use. Miller Starr Regalia attorneys also write Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. For more information, visit www.msrlegal.com.

Bryan W. Wenter, AICP, is a shareholder in Miller Starr Regalia’s Walnut Creek office and a member of the firm’s Land Use Practice Group. His areas of expertise include general plans and specific plans, planned development zoning, vested rights, subdivision maps, development impact fees and exactions, conditional use permits, variances, initiatives and referenda, RLUIPA, CEQA, Ralph M. Brown Act, and Public Records Act. He previously served as City Attorney and Assistant City Attorney for the City of Walnut Creek.

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Miller Starr Regalia’s Land Use Practice Group has broad and deep expertise obtaining and defending approvals required to successfully develop real property throughout California. The firm’s Land Use Developments Blog was created to provide practical information, judicial, legislative, and regulatory updates, tips, and guidelines on cutting edge issues to those in the land use industry, including property owners, developers, public agencies, and technical consultants. For information on CEQA, visit our CEQA Developments blog.

About the Author

Bryan W. Wenter, AICP, is a shareholder in Miller Starr Regalia’s Walnut Creek office and a member of the firm’s Land Use Practice Group. His areas of expertise include general plans and specific plans, planned development zoning, vested rights, subdivision maps, development impact fees and exactions, conditional use permits, variances, initiatives and referenda, RLUIPA, CEQA, Ralph M. Brown Act, and Public Records Act. He previously served as City Attorney and Assistant City Attorney for the City of Walnut Creek.